Gold extended gains during the American session and is up for the day after falling during the previous three days. The value of the ounce is hovering slightly below $1,290. Earlier today bottomed at $1,276.40, the lowest since October 9.
The yellow metal pulled back modestly after the release of US economic data that showed better-than-expected numbers. Initial jobless claims dropped to the lowest since 1973 while the Philly Fed rose unexpectedly. The greenback rose in the market, but the recovery was short-lived.
Philly Fed: Manufacturing firms reported continued growth in October
US: Weekly initial claims was 222,000, a decrease of 22,000 from previous week
After falling to $1,283.50 gold rose back toward $1,290. At the moment of writing it was holding near the highs, holding a bullish tone.
The US Dollar Index dropped below 93.00, to the lowest since Monday and is back to the level it had at the beginning of the week. In Wall Street, the Dow Jones is falling 0.21% after moving off daily lows, but still shows a downside bias. US bonds are up today adding some support to gold.
Thursday, October 19, 2017
May's Spokesman: London will remain world's leading financial centre
A spokesman for the British Prime Minister Theresa May recently crossed the wires, via LiveSquawk, saying that London is the world's leading financial centre and would remain that way. The spokesman didn't comment Goldman Sach CEO Lloyd Blankfein's tweet about Frankfurt.
Earlier in the day, Blankfein, "just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I'll be spending a lot more time here," tweeted out.
Earlier in the day, Blankfein, "just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I'll be spending a lot more time here," tweeted out.
If article 155 is invoked
“Article 155 has never been invoked before, so we are in uncharted territory. Although it is ambiguous in its formulation, effectively it enables the central government to take over control of certain functions of the regional government. Mr Rajoy would be expected to lay out to the upper house which specific measures he intends to take”.
“The Spanish press has suggested that Mr Puigdemont could be replaced by a delegate of the central government, and that the central government would "prioritise control of the regional armed forces and the budget”.
“The Spanish press has suggested that Mr Puigdemont could be replaced by a delegate of the central government, and that the central government would "prioritise control of the regional armed forces and the budget”.
Brent Oil - Some technique view
Since the daily stochastic for Brent is close to the overbought territory, they cannot rule out a decline to 56.95 (daily Bollinger moving average) even to 55.20-55.35 (daily parabolic).
“These dips would enable the contract to gather momentum ahead of initiating a new leg higher to 58.50-58.70 (Fibonacci extensions) last obstacles ahead of 59.80-60 (monthly Bollinger upper band). Only a break of these last resistances would unleash strong upside potential, confirming a lasting rise to 62.60-62.80 (Fibonacci extensions) ahead of 65.70 (38.2% Fibonacci retracement of the 128.40-27.10 bearish wave / March 12 – Jan 16) and 66.90 (9 month moving average).”
“The supports are at 56.95, at 56, at 55.20-55.35 and at 53.70.”
“These dips would enable the contract to gather momentum ahead of initiating a new leg higher to 58.50-58.70 (Fibonacci extensions) last obstacles ahead of 59.80-60 (monthly Bollinger upper band). Only a break of these last resistances would unleash strong upside potential, confirming a lasting rise to 62.60-62.80 (Fibonacci extensions) ahead of 65.70 (38.2% Fibonacci retracement of the 128.40-27.10 bearish wave / March 12 – Jan 16) and 66.90 (9 month moving average).”
“The supports are at 56.95, at 56, at 55.20-55.35 and at 53.70.”
Crude oil prices are extending the downside today
Prices for the WTI are trading on the defensive after Chinese GDP figures failed to surprise markets to the upside today. In fact, the Chinese economy is expected to expand at an annualized 6.8% during the July-September period, in line with prior surveys.
Today’s price action around crude oil seems to ignore another weekly draw in US crude oil supplies, as per yesterday’s EIA report.
Furthermore, WTI stayed apathetic after OPEC’s Secretary Barkindo said earlier in the session that the rebalance of the oil market remains on track.
Looking ahead, US oil rig count by driller Baker Hughes is due tomorrow.
Today’s price action around crude oil seems to ignore another weekly draw in US crude oil supplies, as per yesterday’s EIA report.
Furthermore, WTI stayed apathetic after OPEC’s Secretary Barkindo said earlier in the session that the rebalance of the oil market remains on track.
Looking ahead, US oil rig count by driller Baker Hughes is due tomorrow.
Brexit Summit in focus
The GBP/USD pair is seen making minor-recovery attempts, although faces stiff resistances near 1.3170 region on its way to 1.32 handle.
GBP/USD:
The spot held onto the major support located near 1.3125/40 area, and from there attempted a tepid-recovery, as the dust settled after the poor UK retail sales aftermath. The recovery seen in Cable is on the back of ongoing weakness seen in the US dollar across the board, fuelled by a rally in EUR/USD above 1.1800 levels, as the Spanish government seems to have regained their grip on Catalonia.
Spanish Spokesman confirms implementation of Article 155
Catalan Leader threatens Spanish PM to declare formal independence if no dialogue
Meanwhile, with the EU/ Brexit Summit underway, the recovery may remain in check, as the pound could continue to feel the heat from the EU-UK deadlock on the Brexit negotiations, while increased nervousness ahead of the UK PM May’s speech at the Summit could also keep the bulls at bay.
Also, of note for the major remains the US jobless claims and Philly Fed manufacturing index due later in the NA session for further momentum.
GBP/USD:
The spot held onto the major support located near 1.3125/40 area, and from there attempted a tepid-recovery, as the dust settled after the poor UK retail sales aftermath. The recovery seen in Cable is on the back of ongoing weakness seen in the US dollar across the board, fuelled by a rally in EUR/USD above 1.1800 levels, as the Spanish government seems to have regained their grip on Catalonia.
Spanish Spokesman confirms implementation of Article 155
Catalan Leader threatens Spanish PM to declare formal independence if no dialogue
Meanwhile, with the EU/ Brexit Summit underway, the recovery may remain in check, as the pound could continue to feel the heat from the EU-UK deadlock on the Brexit negotiations, while increased nervousness ahead of the UK PM May’s speech at the Summit could also keep the bulls at bay.
Also, of note for the major remains the US jobless claims and Philly Fed manufacturing index due later in the NA session for further momentum.
Conflict between Catalonia and Spanish government
The reply by the Catalan government on the question whether they had declared independence was not clear enough for the Spanish government and the central government will now continue to enact Article 155, explains Steven Trypsteen, Economist at ING.
“Catalan leader Puigdemont refused to retract his ambiguous declaration of independence and hinted at a possible vote at the Catalan parliament. The standoff between Catalonia and the central government is not good news for the economy in both Spain and the Catalan region. Many companies with their corporate address in Catalonia have already reacted by moving it out of Catalonia. Spain also downgraded its GDP growth forecast for 2018 from 2.6% to 2.3%.”
“This Saturday there is likely to be a cabinet meeting that could ask the Senate to approve specific measures for Catalonia, Article 155, allowing take over of control in Catalonia.”
“Many outcomes are still possible, such as the announcement of snap elections in Catalonia before Article 155 comes into force. In any case, we still seem to be far from a cooperative solution to the problem, which might put moderate upward pressure on Spanish spreads.”
“Catalan leader Puigdemont refused to retract his ambiguous declaration of independence and hinted at a possible vote at the Catalan parliament. The standoff between Catalonia and the central government is not good news for the economy in both Spain and the Catalan region. Many companies with their corporate address in Catalonia have already reacted by moving it out of Catalonia. Spain also downgraded its GDP growth forecast for 2018 from 2.6% to 2.3%.”
“This Saturday there is likely to be a cabinet meeting that could ask the Senate to approve specific measures for Catalonia, Article 155, allowing take over of control in Catalonia.”
“Many outcomes are still possible, such as the announcement of snap elections in Catalonia before Article 155 comes into force. In any case, we still seem to be far from a cooperative solution to the problem, which might put moderate upward pressure on Spanish spreads.”
ECB announcement about its QE
The ECB appears to be working hard to prepare markets for an announcement about its QE plans for 2018, next Thursday, suggests Kit Juckes, Research Analyst at Societe Generale.
“An extension of QE is widely anticipated, but with some Council members canvassing for the programme t to end in 2018 and for the absolute size of the balance sheet being limited, the choice is between a faster pace or a shorter period of time, and slower bond-buying for longer. Buying less for longer without an explicit commitment to stop the programme on a given date is a likely compromise, which is hoped by some to push expectations of the first rate increase well into 2019 and thereby avoid putting upward pressure on the euro. Anatoli thinks we end up with none month extension at EUR 25bn per month, possibly also buying debt with longer maturities.”
“The FX implications are modest, though at the margin a slower pace of buying puts a floor under yields. The idea that pushng the first rate hike further away will hold the euro down doesn’t really make sense to me in the current environment. If markets conclude that QE IS going to end in 2018, they will also conclude that the ECB remains firmly on a path back to normal policies. I don’t see how a clear path to policy normalisation, combined with solid growth and a sizeable current account surplus, are consistent with a EUR/USD rate that is 7-10% below ‘PPP’ and 9% below the average of the last decade. EUR/USD is stuck in its 1.1660-1.1890 range and doesn’t look set to break out, but we still expect 1.27 by the end of 2018, and we expect EUR/JPY to go on rising steadily towards 140.”
“An extension of QE is widely anticipated, but with some Council members canvassing for the programme t to end in 2018 and for the absolute size of the balance sheet being limited, the choice is between a faster pace or a shorter period of time, and slower bond-buying for longer. Buying less for longer without an explicit commitment to stop the programme on a given date is a likely compromise, which is hoped by some to push expectations of the first rate increase well into 2019 and thereby avoid putting upward pressure on the euro. Anatoli thinks we end up with none month extension at EUR 25bn per month, possibly also buying debt with longer maturities.”
“The FX implications are modest, though at the margin a slower pace of buying puts a floor under yields. The idea that pushng the first rate hike further away will hold the euro down doesn’t really make sense to me in the current environment. If markets conclude that QE IS going to end in 2018, they will also conclude that the ECB remains firmly on a path back to normal policies. I don’t see how a clear path to policy normalisation, combined with solid growth and a sizeable current account surplus, are consistent with a EUR/USD rate that is 7-10% below ‘PPP’ and 9% below the average of the last decade. EUR/USD is stuck in its 1.1660-1.1890 range and doesn’t look set to break out, but we still expect 1.27 by the end of 2018, and we expect EUR/JPY to go on rising steadily towards 140.”
Brent Crude oil
Brent prices are down 1.17% in Europe following Wednesday's 'indecision candle' (Doji).
At the time of writing, the front month contract was trading 70 cents lower at $57.45/barrel. Prices clocked a high of $58.30 earlier today.
The drop in oil prices in the European session goes well with the risk-off action in the broader market (European equities are down, safe havens - Gold, Treasury prices and Yen are up).
Oil specific factors favor upside in the prices. To start with, analysts and traders see OPEC, Russia and other major producers extend the global output deal beyond its expiry date at the end of March 2018.
Meanwhile, in the US inventories continue to fall. The US Energy Information Administration (EIA) reported on Wednesday that US crude inventories fell by 5.7 million barrels in the week to Oct. 13, to 456.49 million barrels.
Yesterday's Doji candle, if followed by an end of the day close below $57.28 (Oct 6 high) today, would signal bearish doji reversal.
At the time of writing, the front month contract was trading 70 cents lower at $57.45/barrel. Prices clocked a high of $58.30 earlier today.
The drop in oil prices in the European session goes well with the risk-off action in the broader market (European equities are down, safe havens - Gold, Treasury prices and Yen are up).
Oil specific factors favor upside in the prices. To start with, analysts and traders see OPEC, Russia and other major producers extend the global output deal beyond its expiry date at the end of March 2018.
Meanwhile, in the US inventories continue to fall. The US Energy Information Administration (EIA) reported on Wednesday that US crude inventories fell by 5.7 million barrels in the week to Oct. 13, to 456.49 million barrels.
Yesterday's Doji candle, if followed by an end of the day close below $57.28 (Oct 6 high) today, would signal bearish doji reversal.
Australia: stronger labour report
Australia’s strong jobs growth will need to translate into consumption, which hasn’t been the case so far in support for an early RBA rate hike.
“Australia’s September labor report was another upside surprise, with 19.8k jobs growth and a further fall in the unemployment rate to 5.5% from 5.6% in August (consensus: 15k and 5.6%). Part-time jobs rose by 13.7k, almost same rise as in August, while there was a sharp slowdown in the full-time jobs to 6.1k from 39.5k. The participation rate was steady at 65.2%.”
“Steady part-time jobs growth and participation rate indicate that that even new entrants to the labor force are finding it easy to obtain work. However, strong jobs growth needs to translate into private consumption, which hasn’t been the case so far. A dismal retail sales growth in August reduced the likelihood of an early RBA rate hike.”
“Australia’s September labor report was another upside surprise, with 19.8k jobs growth and a further fall in the unemployment rate to 5.5% from 5.6% in August (consensus: 15k and 5.6%). Part-time jobs rose by 13.7k, almost same rise as in August, while there was a sharp slowdown in the full-time jobs to 6.1k from 39.5k. The participation rate was steady at 65.2%.”
“Steady part-time jobs growth and participation rate indicate that that even new entrants to the labor force are finding it easy to obtain work. However, strong jobs growth needs to translate into private consumption, which hasn’t been the case so far. A dismal retail sales growth in August reduced the likelihood of an early RBA rate hike.”
Subscribe to:
Posts (Atom)